2021 Santa rally falls victim to Omicron

<p>Kia ora,</p><p>Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the 2021 Santa rally seems to have been snuffed out with the rise of Omicron.</p><p>The NZD is falling in a sharp risk-off mood that is gripping markets to end the year.</p><p>Global investors are dumping shares as concerns about the Omicron variant build. Investors are watching its rapid spread and case numbers explode in Europe and the US. Hopes that it would be milder than the Delta variant seem to be questioned by early surveys, and hospitals fill up with unvaccinated sufferers. Vaccination only seems to reduce the severity of symptoms and likelihood of contracting it, rather than eliminating the risks.</p><p>Further, the US seems to be hamstrung by a key Senator refusing to support any expansion of the frayed American social safety net, suggesting the economic impacts of this Omicron resurgence may seriously reduce consumer economic activity in 2022. As US consumer spending is the key engine of global economic activity, investor fears are now worldwide.</p><p>However, a widely-watched <a href="https://www.conference-board.org/pdf_free/press/US%20LEI%20PRESS%20RELEASE%20-%20December%202021.pdf" target="_blank"><strong>leading indicator series</strong></a> from the US Conference Board is very positive in December, indicating growing gains and "suggesting the current economic expansion will continue into the first half of 2022". Obviously markets are ignoring this data today.</p><p>In Japan, they have just approved a US$320 bln "<a href="https://asia.nikkei.com/Economy/Japan-enacts-record-extra-budget-to-fund-economic-package" target="_blank"><strong>supplementary budget</strong></a>" for the 2021/22 year aimed at keeping their economy juiced up and supporting the good recovery there that seem to be building.</p><p>Taiwanese <a href="https://www.moea.gov.tw/Mns/dos_e/b